PERSPECTIVES

Tech-savvy investors and low-cost robo-advice

Kendra Thompson is the North America lead for Accenture Wealth Management Services.

Digital technology is changing how investors interact with their advisors, and how wealth management firms serve their clients. Accenture’s Kendra Thompson shares her thoughts on how the client-advisor relationship has evolved and how the wealth management industry can adapt to this brave new digital world.

How has digital technology changed consumer expectations?
Thanks to the introduction of digital experiences like online banking, people have come to expect quick, easy and convenient access in all sorts of service environments. There is the sense that everything should be available on demand—whether that’s products, services, information or entertainment.

On the flip side, the Internet has become an important place for consumers to research products and services, compare prices, and post and read reviews. Technologies like livestreaming and social media have made it possible to share information and opinions instantly with vast audiences and without travel.

How is that starting to play out in the wealth management space?
On the demand side, investors are demanding more planning and portfolio management tools. They want to be able to track and compare investments in real time—even self-invest.

On the supply side, firms and advisors are also beginning to embrace digital technology. Sixty-eight percent already use some form of social media with clients (77 percent if we look specifically at insurance firm advisors), and 51 percent are actually in favor of providing self-investment tools to their clients.

What makes today’s investors different from those who came before them?
First off, they’re tech-savvy. As of early 2014, millennials now outnumber baby boomers in the United States. This new majority has grown up using social media, and digital experiences have played an integral part in their lives. For them, instant access and personalized service are not “nice to haves”—they’re required.

Second, they’re well-informed. With greater access to information than ever before, today’s investors are more engaged, more inclined to question their advisors and more likely to seek services elsewhere if their needs are not met.

In many ways, we’re seeing a subtle shift in the balance of power between clients and advisors.

How does robo-advice fit into this picture?
We know that digital tools for wealth management are in high demand. In fact, 25 percent of investors we surveyed said they would switch firms to obtain them. We also know that financial advisors are having difficulty meeting this demand. Among advisors with less than 10 years of experience, 55 percent revealed their clients had requested tools that they were unable to provide.

So it’s no surprise that we have seen a growing number of financial technology (Fintech) start-ups entering the wealth management space in recent years. Small and nimble, these new players have focused on developing fully automated digital investment services that are a low-cost alternative to traditional human advisors.

Where does that leave traditional wealth management firms and human advisors?
More and more wealth managers and fund managers are establishing robo-like offerings—either building their own platforms or buying client-friendly services. For them, robo-advice is a complement for their human-based advice channels. They’re relying on the fact that 81 percent of wealth management clients want face-to-face interaction, and 77 percent want to work with their financial advisors to grow and manage their wealth.

How can wealth management firms stay relevant over time?
Wealth management firms need to focus on creating efficient, client-centric processes at critical phases of the client-advisor relationship. They must establish a strong onboarding process, collaborate with clients on goal-based investing, and continually leverage new innovations to improve how they gather and use information. Ultimately, investors are looking for transparency and value.

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